THE NATIONAL BANK FOR AGRICULTURE AND RURAL  
DEVELOPMENT ACT, 1981 
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ARRANGEMENT OF SECTIONS 
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CHAPTER I 
PRELIMINARY

SECTIONS 

1. Short title, extent and commencement.
2. Definitions. 

CHAPTER II 
ESTABLISHMENT OF THE NATIONAL BANK FOR AGRICULTURE AND  
RURAL DEVELOPMENT AND CAPITAL THEREOF

3. Establishment and incorporation of National Bank for Agriculture and Rural Development. 
4. Capital. 

CHAPTER III 
MANAGEMENT OF THE NATIONAL BANK

 Disqualifications. 

5. Management. 
6. Board of Directors. 
7. Term of office of Chairman and other directors, retirement and payment of fees. 
8. Term of office of Managing Director and whole-time directors, conditions of service, etc. 
9.
10. Vacation and resignation of office by directors.
11. Casual vacancy in the office of Managing Director. 
12. Meetings of Board. 
13. Committees of National Bank. 
14. Advisory Council. 
15. Member of Board or Committee thereof not to participate in meetings in certain cases. 

CHAPTER IV 
TRANSFER OF BUSINESS TO THE NATIONAL BANK

16. Transfer of assets and liabilities of Agricultural Refinance and Development Corporation. 
17. Dissolution of the Corporation and repeal of Act 10 of 1963. 
18. Transfer of business from Reserve Bank. 

CHAPTER V 
BORROWINGS BY THE NATIONAL BANK

19. Borrowings by the National Bank. 
20. Borrowings in foreign currency. 

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CHAPTER VI 
CREDIT FUNCTIONS OF THE NATIONAL BANK

SECTIONS

21. Production and marketing credit 
22. Conversion loan for production credit.
23. Rescheduling of loans to artisans, small-scale industries, etc. 
24. Investment credit—medium term. 
25. Other investment credit. 
26. Purchase and sale of shares. 
27. Loans to State Governments for share capital contribution. 
27A. Loans to State Government, undertakings, etc.
28. Security for credit. 
29. Amounts and securities to be held in trust. 
30. Direct loans. 
30A. Bills rediscounting.
31. Commission. 
32. Issue of guarantees. 
33. Power to impose conditions for accommodation. 
34. Power to call for repayment before agreed period.
35. National Bank to have access to records. 
36. Validity of loan or advance not to be questioned. 
37. National Bank not to grant loans or advances against its own bonds or debentures. 
37A. Prohibited business. 

CHAPTER VII 
OTHER FUNCTIONS OF THE NATIONAL BANK

38. Other functions of National Bank. 
38A. Promotion of subsidiaries.
38B. Securitisation of debt.
38C. Exemption from compulsory registration.
39. Incidental powers. 
40. Deposits and investments.
41. Credit information. 

CHAPTER VIII 
FUNDS, ACCOUNTS AND AUDIT

42. National Rural Credit (Long Term Operations) Fund. 
43. National Rural Credit (Stabilisation) Fund. 
44. Research and Development Fund. 
45. Reserve Fund and other Funds. 
46. Preparation of balance-sheet, etc., of National Bank. 
47. Disposal of surplus. 
48. Audit. 
49. Returns. 

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SECTIONS

50. Staff of National Bank. 

CHAPTER IX 
STAFF 

CHAPTER X 
MISCELLANEOUS 

51. Obligation as to fidelity and secrecy. 
52. Defects in appointment not to invalidate acts, etc. 
52A. Agreement with National Bank on appointment of directors to prevail.
53. Protection of action taken under the Act. 
54. Indemnity of directors. 
55. [Omitted]. 
56. Penalties. 
57. Offences by companies. 
58. Bankers’ Books Evidence Act, 1891, to apply in relation to National Bank. 
59. Liquidation of National Bank. 
60. Power of Board to make regulations. 
61. [Repealed]. 
62. Power to remove difficulty. 
THE FIRST SCHEDULE. 
THE SECOND SCHEDULE [Repealed].

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THE NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT ACT, 1981 

ACT NO. 61 OF 1981

[30th December, 1981.]  
1[An Act to establish a development bank to be known as the National Bank for Agriculture and Rural 
Development  for  providing  and  regulating  credit  and  other  facilities  for  the  promotion  and 
development  of  agriculture,  2[micro-enterprises,  small  enterprises  and  medium  enterprises,  cottage 
and  village  industries,  handlooms] handicrafts  and  other  rural  crafts  and  other  allied  economic 
activities in rural areas with a view to promoting integrated rural development and securing prosperity 
of rural areas and for matters connected therewith or incidental thereto.]

BE it enacted by Parliament in the Thirty-second Year of the Republic of India as follows:— 

CHAPTER I  
PRELIMINARY

1.  Short  title,  extent  and  commencement.—(1)  This  Act  may  be  called  the  National  Bank  for 

Agriculture and Rural Development Act, 1981. 

(2) It extends to the whole of India. 
(3)  It  shall  come  into  force  on  such  date3as  the  Central  Government  may,  by  notification  in  the 
Official Gazette, appoint, and different dates may be appointed for different provisions of this Act, and 
any reference in any provision to the commencement of this Act shall be construed as a reference to the 
coming into force of that provision. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(a)  “agriculture”  includes  horticulture,  animal  husbandry,  forestry,  dairy  and  poultry  farming, 
pisciculture,  and  other  allied  activities,  whether  or  not  undertaken  jointly  with  agriculture  and  the 
expression “agricultural operations” shall be construed accordingly. 

Explanation.—For  the  purposes  of  this  clause,  “pisciculture”  includes  the  development  of 
fisheries, both inland and marine, catching of fish and all activities connected therewith or incidental 
thereto; 

(b)  “Agricultural  Refinance  and  Development  Corporation”  means  the  Corporation  established 
under section 3 of the Agricultural Refinance and Development Corporation Act, 1963 (10 of 1963), 
and  renamed  under  section  3A  of  that  Act  as  the  Agricultural  Refinance  and  Development 
Corporation; 

(c) “Board” means the Board of Directors of the National Bank; 

(d) “central co-operative  bank”  means the principal co-operative  society in a district in a State, 

the primary object of which is the financing of other co-operative societies in that district: 

Provided that in addition to such principal society in a district, or where there is no such principal 
society  in  a  district,  the  State  Government  may  declare  any  one  or  more  co-operative  societies 
carrying on the business of financing other co-operative societies in that district to be also or to be a 
central co-operative bank or central co-operative banks within the meaning of this definition; 

(e) “Chairman” means the Chairman 4*** appointed under section 6; 

1. Subs. by Act 55 of 2000, s. 2, for the long title (w.e.f. 1-2-2001). 
2. Subs. by Act 7 of 2018, s. 2, for  “small-scale industries, cottage and village industries” (w.e.f. 15-3-2018). 
3. 1st May, 1982, vide notification No. S.O. 278(E), dated 21st April, 1982 (except sections 3, 16 and 18), see Gazette of India, 

Extraordinary, Part II, sec. 3(ii). 
12th July, 1982, vide notification No. S.O. 484(E), dated 6th July, 1982 (in respect sections 3, 16 and 18), see Gazette of India, 
Extraordinary, Part II, sec. 3(ii). 

4. The words “of the Board” omitted by Act 55 of 2000, s. 3 (w.e.f. 1-2-2001). 

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(f)  “co-operative  society”  means  a  society  registered,  or  deemed  to  be  registered,  under  the  
Co-operative Societies Act, 1912 (2 of 1912) or any other law relating to co-operative societies for 
the time being in force in any State; 

(g) “crops” includes products of agricultural operations; 

(h) “director” means a director appointed under section 6; 
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* 

* 

 (j) “Managing Director” means the Managing Director appointed under section 6; 

(k) “marketing of crops” includes the processing of crops prior to marketing by any agricultural 

producers or any organisation of such producers; 

2[(ka)  “micro  enterprise”,  “small  enterprise”  and  “medium  enterprise”,  shall  have  the  same 
meanings  as  are  respectively  assigned  to  them  in  the  Micro,  Small  and  Medium  Enterprises 
Development Act, 2006 (27 of 2006)]; 

(l) “National Bank” means the National Bank for Agriculture and Rural Development established 

under section 3; 

(m) “notification” means a notification published in the Official Gazette; 

(n) “primary rural credit society” means a co-operative society, by whatever name called,— 

(1)  which  has  as  its  object  or  business  the  provision  of  financial  accommodation  to  its 
members  for  agriculture  or  agricultural  operations  or  for  the  marketing  of  crops,  or  for  rural 
development; and 

(2)  the  bye-laws  of  which  do  not  permit  admission  of  any  other  co-operative  society  as 

member: 

Provided that this sub-clause shall not apply to the admission, as a member, of a co-operative 
society, which is a State co-operative bank or a central co-operative bank by reason of such bank 
subscribing  to  the  share  capital  of  the  co-operative  society  out  of  funds  provided  by  the  State 
Government for the purpose; 

(o) “prescribed” means prescribed by regulations made under this Act; 

(p) “regional rural bank” means a regional rural bank established under section 3 of the Regional 

Rural Banks Act, 1976 (21 of 1976); 

(q)  “rural  development”  means  development  of  rural  areas  through  any  activities  conducive  to 

such development. 

Explanation.—For the purposes of this clause,— 

(a) activities conducive to development of rural areas include activities relating to production 
of  goods  or  provision  of  services  in  rural  areas  and  activities  for  the  promotion  of  cottage  and 
village  industries,  3[micro-enterprises,  small  enterprises  and  medium  enterprises,  handicrafts, 
handlooms] and other rural crafts; 

(b) “rural area” means the area comprised in any village and includes the area comprised in 
any  town,  the  population  of  which  does  not  exceed  ten  thousand  or  such  other  figure  as  the 
Reserve Bank may specify from time to time; 

(r) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve 

Bank of India Act, 1934 (2 of 1934); 

1.  Clause (i) omitted by Act 7 of 2018, s. 3 (w.e.f. 15-3-2018). 
2.  Ins. by s. 3, ibid. (w.e.f. 15-3-2018). 
3.  Subs.  by  s.  3,  ibid.,  for  “industry  in  the  tiny  and  decentralised  sector  and  small-scale  industry  and  handicrafts”                      

(w.e.f. 15-3-2018). 

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(s)  “scheduled  bank”  means  a  bank  for  the  time  being  included  in  the  Second  Schedule  to  the 

Reserve Bank of India Act, 1934 (2 of 1934);  

1* 

* 

* 

* 

* 

 (u) “State  co-operative  bank”  means  the  principal co-  operative  society  in a  State, the  primary 

object of which is the financing of other co-operative societies in the State: 

Provided that in addition to such principal society in a State, or where there is no such principal 
society in a State, the State Government may declare any one or more co-operative societies carrying 
on  business  in  that  State  to  be  also  or  to  be  a  State  co-operative  bank  or  State  co-operative  banks 
within the meaning of this definition; 

(v)  “State  land  development  bank”  means  the  co-operative  society  which  is  the  principal  land 
development  bank  (by  whatever  name  called)  in  a  State  and  which  has  as  its  primary  object  the 
providing of long-term finance for agricultural development: 

Provided that, in addition to such principal land development bank in a State, or where there is no 
such bank in a State, the State Government may declare any co-operative society carrying on business 
in that State and authorised by the bye-laws of such co-operative society to provide long-term finance 
for agricultural development to be also or to be a State land development bank within the meaning of 
this definition; 

(w) words and expressions used herein and not defined but defined in the Reserve Bank of India 

Act, 1934 (2 of 1934), shall have the meanings respectively assigned to them in that Act; 

(x) words and expressions used herein and not defined either in this Act or in the Reserve Bank of 
India Act, 1934 (2 of 1934), but defined in the Banking Regulation Act, 1949 (10 of 1949), shall have 
the meanings respectively assigned to them in the Banking Regulation Act, 1949. 

CHAPTER II 
ESTABLISHMENT OF THE NATIONAL BANK FOR AGRICULTURE AND RURAL
DEVELOPMENT AND CAPITAL THEREOF 

3.  Establishment  and 

for  Agriculture  and  Rural 
Development.—(1)  With  effect  from  such  date  as  the  Central  Government  may,  by  notification  in  the 
Official Gazette, appoint, there shall be established for the purposes of this Act, a bank to be known as the 
National Bank for Agriculture and Rural Development. 

incorporation  of  National  Bank 

(2) The  Bank shall be a body corporate with the name aforesaid having perpetual succession and a 
common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property 
and to contract, and may by that name sue and be sued. 

(3) The head office of the National Bank shall be at 2[Mumbai] or at such other place as the Central 

Government may, by notification, specify. 

(4) The National Bank may establish offices, branches or agencies at any place in India, and with the 
previous  approval  of  the  Central  Government  and  in  consultation  with  the  Reserve  Bank,  at  any  place 
outside India.  

4. Capital.—(1) The capital of the National Bank shall be one hundred crores of rupees: 
3[Provided  that  the  Central  Government  may,  by  notification,  increase  the  said  capital  up  to  thirty 

thousand crore rupees:  

Provided  further  that  the  Central  Government  may,  in  consultation  with  the  Reserve  Bank  and  by 

notification, further increase the said capital to such amount as it may deem necessary from time to time].

1. Clause (t) omitted by Act 7 of 2018, s. 3 (w.e.f. 15-3-2018). 
2. Subs. by s. 4, ibid., for “Bombay” (w.e.f. 15-3-2018). 
3. The proviso subs by s. 5, ibid. (w.e.f. 15-3-2018). 

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1[(2) The capital of the National Bank which has been subscribed to by the Reserve Bank valued at 
twenty crore rupees as on the date immediately preceding the commencement of the National Bank for 
Agriculture  and  Rural  Development  (Amendment)  Act,  2018  shall,  on  such  commencement,  stand 
transferred to, and vested in, the Central Government:  

Provided that the National Bank may issue capital to such institutions and persons in such manner as 

may be notified by the Central Government:  

Provided further that the shareholding of the Central Government shall not at any time be less than 

fifty-one per cent. of the total subscribed capital.  

(3) The Central Government shall give to the Reserve Bank an amount equal to the face value of the 
subscribed capital, valued at twenty crores of rupees, referred to in sub-section (2), in cash, for transfer to, 
and vesting in the Central Government of the capital of the National Bank which has been so subscribed 
to by the said Bank.]

CHAPTER III 

MANAGEMENT OF THE NATIONAL BANK

5.  Management.—(1)  The  general  superintendence,  direction  and  management  of  the  affairs  and 
business of the National Bank shall vest in a Board of Directors, which shall exercise all powers and do 
all acts and things which may be exercised or done by the National Bank. 

(2) Subject to the provisions of this Act, the Board in discharging its functions, shall act on business 

principles with due regard to public interest. 

(3)  Subject  to  the  provisions  of  sub-section  (1)  and  save  as  otherwise  provided  in  the  regulations 
made under this Act, the Managing Director shall also have powers of general superintendence, direction 
and management of the affairs and business of the National Bank and may also exercise all powers and do 
all acts and things which may be exercised or done by the National Bank: 

2[Provided that during the period of any casual vacancy of the nature referred to in section 11 in the 
office of the Managing Director, the Chairman may also exercise the powers and discharge the functions 
of the Managing Director until the person appointed by the Central Government under section 11 to act as 
Managing Director enters upon his office.] 

(4) Any whole-time director appointed under sub-section (3) of section 6 shall assist the Managing 
Director in the discharge of his functions under sub-section (3) and perform such duties as the Board may 
entrust or delegate to him. 

(5) In the discharge of his powers and functions under sub-section (3), the Managing Director shall 

follow such directions as the Chairman may give. 

(6)  In  the  discharge  of  its  functions  under  this  Act,  the  National  Bank  shall  be  guided  by  such 
directions in matters of policy involving public interest as the Central Government, in consultation with 
the Reserve Bank, or the Reserve Bank, may give in writing. 

6.  Board  of  Directors.—3[(1)The  Board  of  Directors  of  the  National  Bank  shall  consist  of  the 

following, namely:— 

(a) a Chairman; 

(b)  three  directors  from  amongst  experts  in  rural  economics,  rural  development,  village  and 
cottage  industries,  4[micro-enterprises,  small  enterprises  and  medium  enterprises]  or  persons  having 
experience  in  the  working  of  co-operative  banks,  regional  rural  banks  or  commercial  banks  or  any 
other matter the special knowledge or professional experience in which is considered by the Central 
Government as useful to the National Bank; 

1. Subs by Act 7 of 2018, s. 5, for sub-section (2)  (w.e.f. 15-3-2018). 
2. Ins. by Act 66 of 1988, s. 43 (w.e.f. 30-12-1988). 
3. Subs. by Act 55 of 2000, s. 5, for sub-sections (1) and (2) (w.e.f. 1-2-2001). 
4. Subs. by Act 7 of 2018, s. 6, for “small-scale industries”  (w.e.f. 15-3-2018). 

7 

(c) three directors from out of the directors of the Reserve Bank; 

(d) three directors from amongst the officials of the Central Government; 

(e) four directors from amongst the officials of the State Governments; 

(f)  such  number  of  directors  elected  in  the  prescribed  manner,  by  shareholders  other  than  the 
Reserve  Bank,  the  Central  Government  and  other  institutions  owned  or  controlled  by  the  Central 
Government  whose  names  are  entered  on  the  register  of  shareholders  of  the  National  Bank  ninety 
days  before  the  date  of  the  meeting  in  which  such  election  takes  place  on  the  following  basis, 
namely:— 

(i) where the total amount of equity……………………………….
share capital issued to such shareholders is ten per cent. or less of the 
total issued equity capital

two directors;

(ii) where the total amount of equity................................................

share capital issued to such shareholders is more than ten per cent. 
but less than twenty-five per cent. of the total issued equity capital 

three directors; 
and 

(iii) where the total equity share capital…………………………...

four directors: 

issued to such shareholders is twenty-five per cent. or more of the 
total issued equity capital: 

Provided  that  until  the  assumption  of  charge  by  the  elected  directors  under  this  clause,  the 
Central Government may at any time nominate such number of directors not exceeding four from 
amongst  persons  having  special  knowledge  of,  and  professional  experience  in,  agricultural 
science,  technology,  economics,  banking,  co-operatives,  law,  rural  finance,  investment, 
accountancy,  marketing  or  any  other  matter,  the  special  knowledge  of,  and  professional 
experience in, which would, in the opinion of the Central Government, be useful to the National 
Bank for carrying out its functions; and 

(g) a Managing Director. 

(2)  The  Chairman  and  other  directors,  excluding  the  directors  referred  to  in  clause  (f),  shall  be 

appointed by the Central Government in consultation with the Reserve Bank: 

Provided that no such consultation shall be necessary in the case of directors appointed under clause 

(d) of sub-section (1). 

(3) Where the Central Government is satisfied, in consultation with the Reserve Bank,1*** that it is 
necessary so to do, it may appoint one or more whole-time directors with such designations as may be 
deemed appropriate by that Government and any whole-time director so appointed shall also be a member 
of the Board: 

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7.  Term  of  office  of  Chairman  and  other  directors,  retirement  and  payment  of fees.—(1) The 
Chairman  shall  hold  office  for  such  term  not  exceeding  five  years  and  shall  receive  such  salary  and 
allowances as the Central Government may, at the time of appointment, specify 3[and shall be eligible for 
reappointment]: 

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* 

* 

* 

1. The words “and the Board” omitted by Act 81 of 1985, s. 17(w.e.f. 1-5-1986). 
2. The proviso omitted by s. 17, ibid. (w.e.f. 1-5-1986). 
3. Ins. by Act 55 of 2000, s. 6 (w.e.f. 1-2-2001). 
4. The proviso omitted by Act 81 of 1985, s.18 (w.e.f. 1-5-1986). 

8 

 
 
 
1[(1A) Notwithstanding anything contained in sub-section (1), the Central Government shall have the 
right to terminate the term of office of the Chairman at any time before the expiry of the term specified 
under that sub-section by giving him a notice of not less than three months in writing or three months’ 
salary and allowances in lieu of such notice.]

2[(1B) In the case of a vacancy in the office of the Chairman, the Managing Director shall perform the 

functions and duties of the Chairman during such vacancy.]

3[(2) Subject to the provisions contained in sub-section (5), a director appointed under clause (b) or 
clause (c) of sub-section (1) of section 6, shall hold office for such term, not exceeding three years, as the 
Central Government may specify in this behalf 4***, and shall be eligible for reappointment:  

Provided that no such director shall hold office continuously for a period exceeding six years.] 
(3) The Central Government may, in consultation with the Reserve Bank, remove the Chairman 5*** 
at any time before the expiry of his term of office after giving him a reasonable opportunity of showing 
cause against the proposed removal. 

6[(4) The Chairman and any other director, who is not an officer of the Central Government or a State 
State Government or an officer of the Reserve Bank or any body or corporation established by or under 
any Central Act or any State Act and owned or controlled by such Government, shall be paid such fees 
and allowances as may be prescribed for attending the meetings of the Board or of any of its committees 
and for attending to any other work of the National Bank.]

7[(5) The directors appointed under clauses (b) to (f) of sub-section (1) of section 6 shall hold office 

during the pleasure of the Central Government.] 

8. Term of office of Managing Director and whole-time directors, conditions of service, etc.—(1) 
The  Managing  Director  and  any  whole-time  director  appointed  under  sub-section  (3)  of  section  6  
shall,— 

(a) hold office for such term not exceeding five years as the Central Government may, at the time 

of appointment, specify 8[and shall be eligible for reappointment]; 

(b) receive such salary and allowances and be governed by such terms and conditions of service 
as the Board may, with the previous approval of the Central Government and in consultation with the 
Reserve Bank, determine: 

Provided  that  the  Managing  Director  and  any  such  whole-time  director  appointed  to  the  first 
Board  shall  receive  such  salary  and  allowances  and  be  governed  by  such  terms  and  conditions  of 
service as the Central Government may, in consultation with the Reserve Bank, determine. 

(2)  The  Central  Government  may,  in  consultation  with  the  Reserve  Bank,  remove  the  Managing 
Director or any whole-time director appointed under sub-section (3) of section 6 at any time before the 
expiry  of  his  term  of  office,  after  giving  him  a  reasonable  opportunity  of  showing  cause  against  the 
proposed removal. 

(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), the Central Government 
shall have the right to terminate the term of office of the Managing Director or of any whole-time director 
appointed  under  sub-section  (3)  of  section  6  at  any  time  before  the  expiry  of  the  term  fixed  under  
sub-section (1) by giving him notice of not less than three months in writing or three months’ salary and 
allowances in lieu of such notice: 

1. Ins. by Act 81 of 1985, s. 18  (1-5-1986). 
2. Ins. by Act 55 of  2000, s. 6 (w.e.f. 1-2-2001). 
3. Subs. by Act 66 of 1988, s. 45, for sub-section (2) (w.e.f. 30-12-1988). 
4. The words “and thereafter until his successor enters upon his office” omitted by Act 55 of 2000, s. 6 (w.e.f. 1-2-2001). 
5.  The  words,  brackets  and  figure  “or  any  other  director  referred  to  in  sub-section  (2)”  omitted  by  Act  66  of  1988,  s.  45  

(w.e.f. 30-12-1988). 

6.  Subs. by Act 55 of 2000, s. 6, for sub-section (4) (w.e.f. 1-2-2001). 
7. Ins. by Act 66 of 1988, s. 45 (w.e.f. 30-12-1988). 
8. Ins. by Act 55 of 2000, s. 7 (w.e.f. 1-2-2001). 

9 

Provided that  the  Central Government  shall,  before terminating  the term  of  office  of  the  Managing 
Director  or  any  whole-time  director  appointed  under  sub-section  (3)  of  section  6,  consult  the  Reserve 
Bank. 

9. Disqualifications.—(1) No person shall be a director who— 

(a) is of unsound mind and stands so declared by a competent court; or 

(b)  is  or  has  been  convicted  of  any  offence  which,  in  the  opinion  of  the  Central  Government, 

involves moral turpitude; or 

(c) is, or at any time has been, adjudicated insolvent or has suspended payment of his debts or has 

compounded with his creditors.  

(2) The appointment as director of any person who is a Member of Parliament or the Legislature of 
any State shall, unless within two months of the date of his appointment he ceases to be such member, be 
void  on  the  expiry  of  the  said  period  of  two  months  and  if  any  director  is  elected  or  nominated  as  a 
Member of Parliament or of any State Legislature he shall cease to be a director as from the date of such 
election or nomination, as the case may be.

10. Vacation and resignation of office by directors.—(1) If a director— 

(a) becomes subject to any of the disqualifications mentioned in section 9; or 

(b) is absent without leave of the Board for more than three consecutive meetings thereof,  

his seat shall thereupon become vacant. 

(2) Any director may resign his office by giving notice thereof in writing to the Central Government, 
and  on  his  resignation  being  accepted  by  the  Central  Government  or  if  his  resignation  is  not  sooner 
accepted, on the expiry of three months from the receipt thereof by the Central Government, he shall be 
deemed to have vacated his office. 

11. Casual vacancy in the office of Managing Director.—If the Managing Director is by infirmity 
or  otherwise  rendered  incapable  of  carrying  out  his  duties  or  is  absent  on  leave  or  otherwise,  in 
circumstances  not  involving  the  vacation  of  his  appointment,  the  Central  Government  may,  after 
consultation with the Reserve Bank and the Board, appoint another person to act in his place as Managing 
Director during his absence. 

12. Meetings of Board.—(1) The Board shall meet at such times and places and shall observe such 

rules of procedure in regard to the transaction of business at its meetings as may be prescribed. 

(2)  The  Chairman  of  the  Board,  or,  if  for  any  reason  he  is  unable  to  attend  any  meeting,  1[the 
Managing  Director  and  in  the  absence  of  both,  the  Chairman  and  the  Managing  Director]  any  other 
director  nominated  by  the  Chairman  in  this  behalf,  and  in  the  absence  of  such  nomination,  any  other 
director elected by the directors present at the meeting, shall preside at the meeting of the Board. 

(3) All questions which come up before any meeting of the Board shall be decided by a majority of 
votes of the directors present and voting, and in the event of an equality of votes, the Chairman, or, in his 
absence, the person presiding, shall have a second or casting vote. 

13.  Committees  of  National  Bank.—(1)  The  Board  may  constitute  an  Executive  Committee 

consisting of such number of directors as may be prescribed. 

(2)  The  Executive  Committee  shall  discharge  such  functions  as  may  be  prescribed  or  may  be 

delegated to it by the Board. 

(3)  The  Board  may  constitute  such  other  committees,  whether  consisting  wholly  of  directors  or 
wholly  of  other  persons  or  partly  of  directors  and  partly  of  other  persons  as  it  thinks  fit  and  for  such 
purposes as it may decide and every committee so constituted shall discharge such functions as may be 
delegated to it by the Board. 

1. Ins. by Act 55 of 2000,  s. 8 (w.e.f. 1-2-2001). 

10 

(4)  The  Executive  Committee  shall  meet  at  such  times  and  places  and  shall  observe  such  rules  of 

procedure in regard to the transaction of business at its meetings, as may be prescribed. 

(5)  The  times  and  places  at  which  any  committee  constituted  under  sub-section  (3)  shall  meet,  the 
rules  of  procedure  which  such  committee  shall  observe  in  regard  to  the  transaction  of  business  at  its 
meetings, and the fees and allowances which may be paid to the members of such committee for attending 
the meetings of the committee and for attending to any other work of the National Bank shall be such as 
may be specified by that Bank. 

14.  Advisory  Council.—(1)  1[The  Board  may]  constitute  an  Advisory  Council  consisting  of  such 
number of directors and such other persons who, in the opinion of the Board, have special knowledge of 
agriculture,  agricultural  credit,  co-operation  and  rural  economics,  2[micro-enterprises,  small  enterprises 
and  medium  enterprises,]  village  and  cottage  industries  and  handicrafts  and  other  rural  crafts  or  have 
special  knowledge  and  appreciation  of  the  country's  overall  developmental  policies  and  in  particular 
overall monetary and credit policies, which is considered by the Board as useful to the National Bank. 

(2) The Advisory Council shall advise the National Bank in such matters as may be referred to the 
Advisory Council by the National Bank and may discharge such other functions as may be entrusted or 
delegated to the Advisory Council by the National Bank. 

(3) A member of the Advisory Council shall hold office for such term not exceeding five years as the 
National  Bank  may  fix,  and  receive  such  fees  and  allowances  as  may  be  prescribed  for  attending  the 
meetings of the Advisory Council and for attending to any other work of the National Bank. 

(4)  The  Advisory  Council  shall  meet  at  such  times  and  places  and  shall  observe  such  rules  of 

procedure in regard to transaction of business at its meetings as may be prescribed. 

15. Member of Board or Committee thereof not to participate in meetings in certain cases.—A 
director of the Board or a member of a Committee, who has any direct or indirect pecuniary interest in 
any matter coming up for consideration at a meeting of the Board or a Committee thereof, shall, as soon 
as possible after relevant circumstances have come to his knowledge, disclose the nature of his interest at 
such meeting, and the disclosure shall be recorded in the minutes of the Board, or the Committee, as the 
case  may  be,  and  the  director  or  member  shall  not  take  any  part  in  any  deliberation  or  decision  of  the 
Board or the Committee with respect to that matter. 

CHAPTER IV 
TRANSFER OF BUSINESS TO THE NATIONAL BANK

16. Transfer of assets and liabilities of Agricultural Refinance and Development Corporation.—
(1) On such date as the Central Government, in consultation with the Reserve Bank may, by notification, 
appoint, the entire undertaking of the Agricultural Refinance and Development Corporation (hereafter in 
this Chapter referred to as the “Corporation”) including all business, property, assets and liabilities, rights, 
interests, privileges and obligations of whatever nature, shall stand transferred to and vest in the National 
Bank. 

(2) As compensation for the transfer of the undertaking of the Corporation to the National Bank under 
sub-section (1), the National Bank shall within six months from the date appointed under that sub-section 
(hereafter in this section referred to as the appointed date) pay to the shareholders of the Corporation a 
sum  equal  to  the  total  paid-up  capital  of  the  Corporation  as  on  the  date  immediately  preceding  the 
appointed date. 

(3) The amount of compensation payable under sub-section (2) to the shareholders of the Corporation 
shall be apportioned among the shareholders in proportion to their contributions to the paid-up capital of 
the Corporation as on the date immediately preceding the appointed date. 

Explanation.—For  the  purposes  of  this  sub-section,  “shareholders  of  the  Corporation”  means 
shareholders  of  the  Corporation  whose  names  appear  on  the  register  of  shareholders  maintained  under 

1. Subs. by 55 of 2000, s. 9, for “The Board shall” (w.e.f. 1-2-2001). 
2. Subs. by Act 7 of 2018, s. 7, for “small-scale industries” (w.e.f. 15-3-2018). 

11 

section 8 of the Agricultural Refinance and Development Corporation Act, 1963 (10 of 1963), on the date 
immediately preceding the appointed date. 

(4)  The  National  Bank  shall  also  pay  to  the  shareholders  of  the  Corporation  referred  to  in  
sub-section (2) an amount calculated at the rate at which the shares of the Corporation were guaranteed as 
to  the  payment  of  minimum  divided  under  section  6  of  the  Agricultural  Refinance  and  Development 
Corporation Act, 1963 (10 of 1963), for the period, if any, that has expired in the accounting year of the 
Corporation  before  the  appointed  date  and  this  amount  the  National  Bank  shall  distribute  to  the 
shareholders  of  the  Corporation  referred  to  in  sub-section  (2)  in  proportion  to  the  shares  held  by  such 
shareholders on the date immediately preceding the appointed date and at the rate at which such shares 
were guaranteed as to the payment of minimum dividend. 

(5)  All  contracts,  deeds,  bonds,  agreements,  powers  of  attorney,  grants  of  legal  representation  and 
other instruments  of  whatever  nature  subsisting  or  having  effect immediately  before  the appointed  date 
and to which the Corporation is a party, or which are in favour of the Corporation, shall be of as full force 
and effect against or in favour of the National Bank, as the case may be, and may be enforced or acted 
upon as fully and effectually as if instead of the Corporation the National Bank had been a party thereto, 
or as if they had been in favour of the National Bank. 

(6) If, immediately before the appointed date, any suit, appeal or other legal proceeding of whatever 
nature, is pending, by or against the Corporation, the same shall not abate, be discontinued or be in any 
way  prejudicially  affected  by  reason  of  the  transfer  to  the  National  Bank  of  the  undertaking  of  the 
Corporation,  or  of  anything  contained  in  this  Act,  but  the  suit,  appeal  or  other  proceeding  may  be 
continued, prosecuted and enforced, by or against the National Bank.

17.  Dissolution  of  the  Corporation and  repeal  of Act  10 of  1963.—On  the date  appointed  under 

sub-section (1) of section 16,— 

(a) the Corporation shall stand dissolved; and 

(b) the Agricultural Refinance and Development Corporation Act, 1963, shall stand repealed. 

18. Transfer of business from Reserve Bank.—(1) On such date as the Central Government may, in 
consultation  with the  Reserve  Bank,  by  notification, appoint, the assets and liabilities  with  the  Reserve 
Bank relating to— 

(a)  the  National  Agricultural  Credit  (Long  Term  Operations)  Fund  established  and  maintained 

under section 46A of the Reserve Bank of India Act, 1934 (2 of 1934); and 

(b) the National Agricultural Credit (Stabilisation) Fund established and maintained under section 

46B of the Reserve Bank of India Act, 1934 (2 of 1934), 

shall  stand  transferred  to  the  National  Bank  and  form  part  of  the  National  Rural  Credit  (Long  Term 
Operations) Fund referred to in section 42 and the National Rural Credit (Stabilisation) Fund referred to 
in section 43, respectively. 

(2)  With  effect  from  such  date  as  the  Central  Government  may,  in  consultation  with  the  Reserve 
Bank,  by  notification,  appoint,  the  loans  and  advances  which  the  Reserve  Bank  has  granted  to  State  
co-operative banks and regional rural banks under section 17 [except sub-clause (a) of clause (4)] of the 
Reserve Bank of India Act, 1934 (2 of 1934), and which the Reserve Bank may specify by a general or 
special  order, shall, as far as  may  be,  become  and  be  deemed  to  be  loans and  advances  granted  by  the 
National Bank under section 21, and the National Bank shall repay to the Reserve Bank, the amount of 
such  loans  and  advances  on  such  terms  and  conditions  as  the  Central  Government  may  specify,  in 
consultation with the Reserve Bank. 

(3) All rights, liabilities, interests, privileges and obligations of whatever nature (including the rights 
and obligations arising by way of purchase, sale and rediscount of any bills of exchange and promissory 
notes) of the Reserve Bank in relation to any asset or liability referred to in sub-section (1) or any loan or 
advance referred to in sub-section (2) shall stand transferred to and vest in the National Bank on the date 
on which such asset or liability stands transferred to the National Bank under sub-section (1) or, as the 

12 

case  may  be,  such  loan  or  advance  becomes  under  sub-section  (2)  a  loan  or  advance  granted  by  the 
National Bank. 

(4)  All  contracts,  deeds,  bonds,  agreements,  powers  of  attorney,  grants  of  legal  representation  and 
other  instruments  of  whatever  nature  relating  to  any  asset  or liability  referred  to  in  sub-section  (1)  and 
subsisting or having effect immediately before the date appointed under that sub-section or relating to any 
loan or advance referred to in sub-section (2) and subsisting or having effect immediately before the date 
appointed under that sub-section shall be of as full force and effect against, or in favour of, the National 
Bank, as the case may be, and may be enforced or acted upon as fully and effectually as if instead of the 
Reserve Bank, the National Bank had been a party thereto, or as if they had been in favour of the National 
Bank. 

(5) If, immediately before the date appointed under sub-section (1) or sub-section (2), as the case may 
be, any suit, appeal or other legal proceedings of whatever nature relating to any asset or liability referred 
to in sub-section (1) or any loan or advance referred to in sub-section (2) is pending, by or against the 
Reserve Bank, the same shall not abate, be discontinued, or be in any way prejudicially affected by reason 
of the transfer to the National Bank of such asset or liability under sub-section (1), or as the case may be, 
such loan or advance becoming under sub-section (2) a loan or advance granted by the National Bank, or 
of anything contained in this Act, but the suit, appeal or other proceedings may be continued, prosecuted 
and enforced, by or against the National Bank. 

CHAPTER V 
BORROWINGS BY THE NATIONAL BANK

19. Borrowings by the National Bank.—The National Bank may, for the purpose of carrying out its 

functions under this Act,— 

1[(a) issue and sell bonds, debentures and other financial instruments with or without guarantee of 

the Central Government on such terms and conditions as may be approved by the Board;] 

2[(b) borrow money from the Reserve Bank repayable on demand or otherwise on such terms and 
conditions including the terms relating to security and purposes as may be specified by the Reserve 
Bank; 

(c) borrow money from the Central Government and from any other authority or organisation or 

institution approved by the Board, on such terms and conditions as may be agreed upon; 

(d)  accept  from  the  Central  Government,  a  State  Government,  a  local  authority,  a  State  land 
development  bank,  a  State  co-operative  bank  or  a  scheduled  bank  or  any  person  or  body,  whether 
incorporated or not, deposits repayable on such terms as the National Bank may, with the approval of 
the Reserve Bank, fix; and 

(e)  receive  gifts,  grants,  donations  or  benefactions  from  the  Central  Government  or  any  State 

Government or any other source.] 
3[20.  Borrowings  in  foreign  currency.—(1)  Notwithstanding  anything  contained  in  the  Foreign 
Exchange Management Act, 1999 (42 of 1999), or in any other law for the time being in force, relating to 
foreign exchange, the National Bank may borrow, with the previous approval of the Central Government 
and  in  consultation  with  the  Reserve  Bank,  foreign  currency  from  any  bank  or  financial  institution  in 
India or elsewhere, for granting loans and advances or for utilising such currency for any other purpose 
specified under the provisions of this Act.]

CHAPTER VI 
CREDIT FUNCTIONS OF THE NATIONAL BANK

21. Production and marketing credit.—(1) The National Bank may provide by way of refinance, 
loans  and  advances,  repayable  on  demand  or  on  the  expiry  of  fixed  periods  not  exceeding  eighteen 

1. Subs. by Act 55 of 2000, s. 10, for clause (a) (w.e.f. 26-9-2000). 
2. Subs. by s. 10, ibid., for clauses (b) to (e) (w.e.f. 26-9-2000). 
3. Subs. by s. 11, ibid., for section 20 (w.e.f. 1-2-2001). 

13 

months,  1[to  State  co-operative  banks,  central  co-operative  banks],  regional  rural  banks,  or  to  any 
financial institution or to any class of financial institutions, which are approved by the Reserve Bank in 
this behalf, for financing— 

(i) agricultural operations or the marketing of crops, or 

(ii) the marketing and distribution of inputs necessary for agriculture or rural development, or 

(iii) any other activity for the promotion of or in the field of agriculture or rural development, or 

(iv) bona fide commercial or trade transactions, or 
(v) the production or marketing activities of artisans or of 2[village and cottage industries, micro-
enterprises, small enterprises and medium enterprises or of those engaged in the field of handicrafts, 
handlooms] and other rural crafts. 

(2) The National Bank may make loans and advances under sub-section (1) against the security of— 

(i) stocks, funds and securities other than immovable property, in which a trustee is authorised to 

invest trust money by any law for the time being in force; 

(ii)  promissory  notes  supported  by  documents  of  title  to  goods,  such  documents  having  been 
transferred, assigned or pledged to the borrowing institution as security for a loan or advance made 
for any of the purposes specified in sub-section (1): 

Provided that the National Bank may, whenever it considers it necessary so to do, accept, in lieu 
of the actual assignment of any such security in favour of the National Bank, a declaration in writing 
from the borrowing institution,— 

(a) stating that it holds such documents of title to goods as may be set out in the declaration; 

and 

(b) containing such other particulars as may be required by the National Bank. 

(3)  Notwithstanding  anything  contained  in  sub-section  (2),  the  National  Bank  may  in  its  discretion 

grant a loan or advance— 

(a)  3[to any State co-operative bank or central co-operative bank] if the loan or advance is fully 

guaranteed for repayment of principal and interest by Government; 

(b) to any State co-operative bank which is a scheduled bank, if the loan or advance is secured 
either  by  a  bill  of  exchange  or  promissory  note  executed  by  the  central  co-operative  bank  and 
assigned in favour of the State co-operative bank. 

(4) Notwithstanding anything contained in sub-sections (2) and (3), the National Bank may also make 
loans and advances repayable on demand or on the expiry of fixed periods not exceeding eighteen months 
against promissory notes of a State co-operative bank or a regional rural bank or an institution approved 
under sub-section (1): 

Provided that the borrowing institution furnishes a declaration in writing, setting out the purpose for 
which  it  has  made  loans  and  advances  and  such  other  particulars  as  may  be  required  by  the  National 
Bank. 

4[22. Conversion loan for production credit.—Where the National Bank is satisfied that owing to 
drought, famine or other natural calamities, military operations or enemy action, any State co-operative 
bank,  central  co-operative  bank,  regional  rural  bank  or  any  such  financial  institution  or  any  financial 
institution falling under any such class of financial institutions, as may be approved by the Reserve Bank 
in  this  behalf,  requires  assistance  under  this  section,  it  may  provide  to  such  bank  or  institution  such 

1. Subs. by Act 48 of 2003, s. 2, for “to State co-operative banks” (w.e.f. 19-9-2003). 
2. Subs. by Act 7 of 2018, s. 8, for “small-scale industries, industries in the tiny and decentralised sector, village and cottage 

industries or of those engaged in the field of handicrafts” (w.e.f. 15-3-2018). 

3. Subs. by Act 48 of 2003, s. 2, for “to any State co-operative bank” (w.e.f. 19-9-2003). 
4. Subs. by s. 3, ibid., for section 22 (w.e.f. 19-9-2003). 

14 

financial assistance as it may deem fit by way of making loans and advances repayable on the expiry of 
fixed  periods  not  exceeding  seven  years  and  on  such  terms  and  conditions  as  may  be  specified  in  this 
behalf by the National Bank: 

Provided that loans and advances may be made under this section only for the purpose of enabling the 

borrowing bank or institution,— 

(a) to pay any dues to the National Bank for credit extended for financing agricultural operations 

or the marketing of crops under clause (i) of sub-section (1) of section 21, or 

(b) (i) to make loans or advances to central co-operative banks or primary rural credit societies in 

cases where the borrowing bank is a State co-operative bank, and 

(ii)  to  make  loans  and  advances  to  primary  rural  credit  societies  in  cases  where  the  borrowing 

bank is a central co-operative bank, 

and such loans or advances in both the cases being repayable on the expiry of fixed periods not being less 
than  eighteen  months  and  not  exceeding  seven  years,  by  way  of  reimbursement  of  loans  and  advances 
made  by  such  co-operative  banks  or  societies  for  agriculture  or  agricultural  operations  or  for 
reimbursement of such loans or advances which have been converted into loans or advances repayable on 
expiry of fixed periods not being less than eighteen months and not exceeding seven years from the date 
of conversion: 

Provided further that no loan or advance shall be made under this section to a State co-operative bank 
or a central co-operative bank unless such loan or advance is fully guaranteed as to the repayment of the 
principal and payment of interest, by the State Government.] 

23.  Rescheduling  of  loans  to  artisans,  small-scale  industries,  etc.—Where  the  National  Bank  is 
satisfied  that  owing  to  unforeseen  circumstances  the  rescheduling  of  any  loans  and  advances  made  to 
artisans, 1[village and cottage industries, micro enterprises, small enterprises and medium enterprises and 
those  engaged  in  the  field  of  handicrafts,  handlooms  and  other  rural  crafts],  by  any  State  co-operative 
bank, regional rural bank or any such financial institution or any financial institution falling under such 
class  of  financial  institutions  as  may  be  approved  by  the  Reserve  Bank  in  this  behalf,  has  become 
necessary, it may provide to such bank or institution such financial assistance as it may deem fit by way 
of loans and advances repayable on the expiry of fixed periods not being less than eighteen months and 
not exceeding seven years against such securities as may be specified in this behalf by the National Bank: 

Provided that no loan or advance shall be made under this section to a State co-operative bank unless 
such loan or advance is fully guaranteed as to the repayment of the principal and payment of interest, by 
the  State  Government  but  such  guarantee  may  be  waived  by  the  National  Bank  if  other  security  to  the 
satisfaction  of  the  National  Bank  is  furnished,  or  if,  for  reasons  to  be  recorded  by  it  in  writing,  the 
National Bank is satisfied that the guarantee or other security is not necessary. 

24. Investment credit—medium term.—The National Bank shall provide such financial assistance 
as it may consider necessary by way of making to State co-operative banks, regional rural banks, loans 
and  advances  repayable  on  the  expiry  of  fixed  periods  not  being  less  than  eighteen  months  and  not 
exceeding seven years against such securities as may  be specified, in this behalf, by the National Bank 
and such loans or advances may be made for agriculture, rural development or such other purposes as the 
National Bank may, from time to time, determine: 

Provided that no loan or advance shall be made under this section to a State co-operative bank unless 
such loan or advance is fully guaranteed as to the repayment of the principal and payment of interest, by 
the State Government but such guarantee may be waived by the National Bank, if other security to the 
satisfaction  of  the  National  Bank  is  furnished,  or  if,  for  reasons  to  be  recorded  by  it  in  writing,  the 
National Bank is satisfied that the guarantee or other security is not necessary. 

25.  Other  investment  credit.—(1)  The  National  Bank  may  provide  such  financial  assistance  as  it 

may consider necessary for promoting agriculture and rural development by— 

1. Subs. by Act 7 of 2018, s. 9, for “small-scale industries, industries in the tiny and decentralised sector, village and cottage 

industries and those engaged in the field of handicrafts and other rural crafts,” (w.e.f 15-3-2018). 

15 

(a) making loans and advances, by way of refinance, on such terms and conditions as the National 
Bank  may  think  fit  to  impose,  to  a  State  land  development  bank  or  a  State  co-operative  bank  or  a 
scheduled bank  or  any  other  financial institution approved  by  the  Reserve  Bank  in  this  behalf,  and 
also rescheduling the payment of such loans and advances: 

Provided that the maximum period for which any such loan or advance may be granted, whether 

originally or by rescheduling the payment thereof, shall not exceed twenty-five years; 

(b)  purchasing  or  selling,  or  subscribing  to  the  bonds  or  debentures  issued  by  any  bank  or 
institution  referred  to  in  clause  (a)  and  repayable  within  a  period  not  exceeding  twenty-five  years 
from the dates on which they are issued; 

(c) making loans and advances on such terms and conditions as the National Bank may think fit 
to impose, to a State co-operative bank or a scheduled bank for the purpose of enabling such bank to 
make  loans  or  advances  to  artisans,  1[village  and  cottage  industries,  micro-enterprises,  small 
enterprises  and  medium  enterprises  and  those  engaged  in  the  field  of  handicrafts,  handlooms]  and 
other rural crafts and also rescheduling the payment of such loans and advances: 

Provided that the maximum period for which any such loan or advance may be granted, whether 

originally or by rescheduling the payment thereof, shall not exceed twenty-five years; 

(d) making, where it is considered necessary so to do in connection with any financial assistance 
under clause (a) or clause (b) or clause (c) to a State land development bank or a State co-operative 
bank or a scheduled bank, loans and advances repayable on demand or on the expiry of a fixed period 
not  exceeding  eighteen  months,  by  way  of  refinance  2[or  otherwise]  to  such  bank  and  also 
rescheduling the payment of such loans and advances for such period as the National Bank may deem 
fit. 

(2) The provisions of this section shall be in addition to, and not in derogation of, the provisions of 

section 21 and section 24. 

3[26. Purchase and sale of shares.—The National Bank may subscribe to, or purchase or sell stocks, 
shares,  bonds  or  debentures  of,  or  invest  in  the  securities  of,  any  institution  or  class  of  institutions 
concerned  with  agriculture  and  rural  development  which  the  Board  may  approve  subject  to  such  terms 
and conditions as it may deem fit.] 

27. Loans to State Governments for share  capital contribution.—The National Bank may  make 
loans and advances to State Governments, repayable on the expiry of fixed periods not exceeding twenty 
years  from  the  date  of  making  such  loans  and  advances,  from  the  National  Rural  Credit  (Long  Term 
Operations) Fund established under section 42 for enabling them to subscribe directly or indirectly to the 
share capital of a co-operative credit society. 

4[27A. Loans to State Government, undertakings, etc.—The National Bank may make loans and 
advances to any State Government or a corporation owned or controlled by the State Government or to 
any other person or class of persons, as may be approved by the Board, repayable on the expiry of a fixed 
period not exceeding twenty-five years from the date of making of such loans and advances and subject to 
such  terms  and  conditions,  as  may  be  approved  by  the  Board,  for  the  purpose  of  development  of 
infrastructure facilities for promotion of agriculture and rural development.]

28.  Security  for  credit.—(1)  No  accommodation  shall  be  granted  by  the  National  Bank  under  
clause (a) or clause (c) of sub-section (1) of section 25 or section 30 or section 32 to any institution other 
than  a  scheduled  bank  unless  it  is  fully  and  unconditionally  guaranteed  by  the  Government  as  to  the 
repayment of principal and payment of interest: 

1. Subs. by Act 7 of 2018, s. 10, for “small-scale industries, industries in the tiny and decentralised sector, village and cottage 

industries and those engaged in the field of handicrafts” (w.e.f. 15-3-2018). 

2. Ins. by Act  55 of 2000, s. 12 (w.e.f. 1-2-2001). 
3. Subs. by s. 13, ibid., for section 26 (w.e.f. 1-2-2001). 
4. Ins. by s. 14, ibid. (w.e.f. 1-2-2001). 

16 

Provided that no such guarantee shall be required in cases in which security to the satisfaction of the 

Board is furnished by the borrowing institution. 

(2)  No  accommodation  shall  be  granted  by  the  National  Bank  under  clause  (a)  or  clause  (c)  of  
sub-section (1) of section 25 or section 32 to any scheduled bank unless security to the satisfaction of the 
Board is furnished by such scheduled bank. 

1[(3)  Notwithstanding  anything  contained  in  sub-section  (1)  or  sub-section  (2),  no  guarantee  or 
security referred to therein shall be required in cases in which the Board, for reasons to be recorded in 
writing, decides that no such security or guarantee is necessary in respect of a scheduled bank, a State co-
operative bank or any person or class of persons, specifically approved by the Board or in respect of any 
scheme or class of schemes, having regard to the nature and scope of the scheme or schemes for which 
accommodation is proposed to be granted by the National Bank.] 

29. Amounts and securities to be held in trust.—(1) Any sums received by a borrowing institution 
in repayment or realisation of loans and advances refinanced either wholly or partly by the National Bank 
shall, to  the  extent  of  the  accommodation  granted  by  the  National  Bank  and  remaining  outstanding,  be 
deemed  to  have  been  received  by  the  borrowing  institution  in  trust  for  the  National  Bank,  and  shall 
accordingly be paid by such institution to the National Bank, as per the repayment schedule fixed by the 
National Bank. 

(2) Where an accommodation has been granted to a borrowing institution, all securities held, or which 
may  be  held,  by  such  borrowing  institution,  on  account  of  any  transaction  in  respect  of  which  such 
accommodation has been granted by the National Bank, shall be held by such institution in trust for the 
National Bank. 

2[(3) Notwithstanding anything to the contrary contained in any law for the time being in force, where 
a liquidator is appointed for winding up a borrowing institution, it shall be the duty of the liquidator to 
forthwith pass on to the National Bank the sums recovered by the borrowing institution or the liquidator, 
as  the  case  may  be,  in  repayment  or  realisation  of  the  loans  and  advances  refinanced  either  wholly  or 
partly  by  the  National  Bank  to  the  extent  the  refinance  is  outstanding  and  the  National  Bank  shall  be 
entitled  to  enforce  the  securities  held  by  the  borrowing  institution  in  trust  for  the  National  Bank  as  if 
every  reference  to  the  borrowing  institution  in  any  contract,  security  or  other  document  obtained  by 
borrowing  institution  is  a  reference  to  the  National  Bank  and  accordingly,  the  National  Bank  shall  be 
entitled  to  recover  the  balance  sums  due  under  such  loans  and  advances  from  the  constituents  of 
borrowing institution and any discharge given by the National Bank to such constituent shall be a valid 
discharge and the liquidator shall, on demand made by the National Bank, deliver to it all such contracts, 
securities and other documents, for due enforcement thereof by the National Bank. 

Explanation.—For the purposes of this sub-section, the word “liquidator” shall include liquidator or a 
provisional  liquidator  or  any  person  or  authority  entrusted  with  the  duty  of  liquidating  the  borrowing 
institution.] 

3[30. Direct loans.— The National Bank may, in exceptional circumstances to be recorded in writing 
by the Board, by itself or in association with other financial institutions or scheduled banks, make loans 
and advances, otherwise than by way of refinance to any person or class of persons or body corporate, on 
such terms and conditions, including security and repayable within such period not exceeding twenty-five 
years, as the National Bank may deem fit. 

30A.  Bills  rediscounting.—The  National  Bank  may  rediscount  bills  of  exchange  and  promissory 
notes made, drawn, accepted or endorsed by any company or body corporate concerned with agriculture 
and rural development presented by a scheduled bank, a State co-operative bank, State land development 
bank, regional rural bank or any other institution or class of institutions approved by the Board.] 

1. Subs. by Act 55 of 2000, s. 15, for sub-section (3) (w.e.f. 1-2-2001). 
2.  Ins. by s. 16,  ibid. (w.e.f. 1-2-2001). 
3. Subs. by s. 17, ibid., for section 30 (w.e.f. 1-2-2001).

17 

31.  Commission.—The  National  Bank  may  receive,  for  the  rendering  of  any  of  the  services 
mentioned  in  this  Chapter  or  Chapter  VII,  such  commission  or  other  consideration  as  may  be  agreed 
upon. 

1[32. Issue of guarantees.— The National Bank may guarantee, subject to such directions as may be 
issued  by  the  Board,  from  time  to  time,  deferred  payments  in  connection  with  the  purchase  of  capital 
goods or for any other purpose for giving effect to the provisions of this Act, due from any person or class 
of persons, whether incorporated or not.] 

33. Power to impose conditions for accommodation.—In entering into any transaction 2[under this 
Act  with  a  borrower],  the  National  Bank  may  impose  such  conditions  as  it  may  think  necessary  or 
expedient for protecting the interests of the National Bank. 

3[34.  Power  to  call  for  repayment  before  agreed  period.—Notwithstanding  anything  to  the 
contrary contained in any agreement or arrangement, the National Bank may, by notice in writing, require 
any borrower or assisted person to whom it has granted any loan or other financial assistance including 
grants, to discharge forthwith in full, the loan or other financial assistance, including grants, as the case 
may be,— 

(a)  if  it  appears  to  the  National  Bank  that  false  or  misleading  information  in  any  material 

particulars was given in the application for the loan or other financial assistance; or 

(b)  if  the  borrower  or  the person  has  failed  to  comply  with  any  of  the  terms  of  the  contract  or 
arrangement  with  the  National  Bank  in  the  matter  of  loan  or  other  financial  assistance,  including 
grants; or 

(c)  if  there  is  a  reasonable  apprehension  that  the  borrower  is  unable  to  pay  its  debts  or  that 

proceedings for liquidation may be commenced in respect thereof; or 

(d) if for any reason it is necessary so to do, to protect the interests of the National Bank.] 

35. National Bank to have access to records.—4[(1) The National Bank shall have free access to all 
such records of a borrower seeking to avail of any credit or other facilities from the National Bank under 
this Act and also to all such records of any person seeking to avail of any credit or other facilities from 
such borrower, perusal whereof may appear to the National Bank to be necessary in connection with the 
providing of finance or other assistance to such borrower or the refinancing of any loan or advance made 
to such person by the borrower.]

(2) The National Bank may require any institution or person referred to in sub-section (1) to furnish to 
it copies of any of the records referred to in that sub-section and the institution or the person, as the case 
may be, shall be bound to comply with such requisition. 

36. Validity of loan or advance not to be  questioned.—Notwithstanding anything to the  contrary 
contained in any other law for the time being in force, the validity of any loan or advance granted by the 
National  Bank  in  pursuance  of  the  provisions  of  this Act  shall  not  be  called in  question  merely  on  the 
ground  of  non-compliance  with  the  requirements  of  such  other  law  as  aforesaid  or  of  any  resolution, 
contract, memorandum, articles of association or other instrument: 

Provided that nothing in this section shall render valid any loan or advance obtained by any company 
or  co-operative  society  where  such  company  or  co-operative  society  is  not  empowered  by  its 
memorandum to obtain loans or advances. 

37.  National  Bank  not  to  grant  loans  or  advances  against  its  own  bonds  or  debentures.—The 

National Bank shall not grant any loan or advance on the security of its own bonds or debentures. 

1. Subs. by Act 55 of 2000, s. 18, for section 32 (w.e.f. 1-2-2001). 
2. Subs. by s. 19, ibid., for “under this Chapter with a borrowing institution” (w.e.f. 1-2-2001). 
3. Subs. by s. 20, ibid., for section 34 (w.e.f. 1-2-2001). 
4. Subs. by s. 21, ibid., for sub-section (1) (w.e.f. 1-2-2001). 

18 

1[37A.  Prohibited  business.—(1)  The  National  Bank  shall  not  make  any  loans  or  advances  under 
section  30  or  make  any  grants  under  this  Act  to  any  person  or  body  of  persons  of  which  any  of  the 
directors of the National Bank is a proprietor, partner, director, manager, agent, employee or guarantor or 
in which one or more directors of the National Bank together hold substantial interest: 

Provided that this sub-section shall not apply to any borrower if any director of the National Bank— 

(a) is nominated as director of the Board of such borrower by the Government or a Government 
company as defined  2[in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)] or by a 
corporation established by any other law; 

(b) is elected on the Board of such borrower by virtue of shares held in the borrower organisation 
by  the  Government,  or  a  Government  company  as  defined  2[in  clause  (45)  of  section  2  of  the 
Companies Act, 2013 (18 of 2013) ] or by a corporation established by any other law, 

by reason only of such nomination or election, as the case may be.  

Explanation.—For the purposes of this sub-section, “substantial interest”, in relation to a borrower, 
means the beneficial interest held by one or more of the directors of the National Bank or by any relative 
of such director as defined 3[in clause (77) of section 2 of the Companies Act, 2013 (18 of 2013)] whether 
singly  or  taken  together,  in  the  shares  of  the  borrower,  the  aggregate  amount  paid-up  on  which  either 
exceeds five lakhs of rupees or five per cent. of the paid-up share capital of the borrower, whichever is 
lesser. 

(2) The provisions of sub-section (1)— 

(a)  shall  not  apply  to  any  borrower,  if  the  National  Bank  is  satisfied  that  it  is  necessary  in  the 
public interest to enter into business with that borrower and entering into any kind of business with 
such borrower shall be in accordance with and subject to such conditions and limitations, as may be 
approved by the Board; 

(b)  shall  not  apply  to  any  transaction  relating  to  the  business  entered  into  prior  to  the 
commencement  of  the  National  Bank  for  Agriculture  and  Rural  Development  (Amendment)  
Act,  2000  (55  of  2000),  and  all  such  business  and  any  transaction  in  relation  thereto  may  be 
implemented or continued as if that Act had not come into force; 

(c) shall apply only so long as the conditions precedent to such disability as set out in the said 

sub-section continue.]

CHAPTER VII 
OTHER FUNCTIONS OF THE NATIONAL BANK

38. Other functions of National Bank.—The National Bank— 

(i) shall co-ordinate its operations and the operations of various institutions engaged in the field 
of  rural  credit  and  maintain  expert  staff  to  study  all  problems  relating  to  agriculture  and  rural 
development  and  be  available  for  consultation  to  the  Central  Government,  the  Reserve  Bank,  the 
State Governments and the other institutions engaged in the field of rural development; 

(ii) may act as the agent for the Central Government or a State Government or the Reserve Bank 
in the transaction of any business in respect of loans and advances granted or to be granted, or bonds 
or debentures purchased or subscribed for, or to be purchased or subscribed for; 

(iii)  may  provide  facilities  for  training,  for  dissemination  of  information  and  the  promotion  of 
research including the undertaking of studies, researches, techno-economic and other surveys in the 
field  of  rural  banking,  agriculture  and  rural  development  and  it  may  for  the  said  purposes  4[make 
loans or advances or grants] including grants by way of provision for fellowships and chairs to any 
institution. 

1. Ins. by Act 55 of 2000, s. 22 (w.e.f. 1-2-2001). 
2. Subs. by Act 7 of 2018, s. 11, for “in section 617 of the Companies Act, 1956 (1 of 1956)” (w.e.f. 15-3-2018). 
3. Subs. by s. 11, ibid., for “in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956)” (w.e.f. 15-3-2018). 
4. Subs. by Act 55 of 2000, s. 23, for “make grants” (w.e.f. 1-2-2001). 

19 

1[(iv)  may  provide  technical,  legal,  financial,  marketing  and  administrative  assistance  to  any 

person engaged in agriculture and rural development activities; 

(v) may provide consultancy services in the field of agriculture and rural development and other 
related matters in or outside  India, on such terms and against such remuneration, as may be agreed 
upon; 

(vi) may perform the functions entrusted to or required of the National Bank by any other law for 

the time being in force; and 

(vii)  do  any  other  kind  of  business  or  undertake  any  other  kind  of  activity  which  the  Central 

Government or the Reserve Bank may authorise.] 
2[38A. Promotion of subsidiaries.—The National Bank may, in consultation with the Reserve Bank, 
promote,  form  or  manage  or  associate  itself  in  promotion,  formation  or  management  of  companies, 
subsidiaries,  affiliates,  societies,  trusts  or  such  other  association  of  persons,  as  it  may  deem  fit,  for  the 
purpose of carrying out its functions under this Act. 

38B.  Securitisation  of  debt.—Notwithstanding  anything  contained  in  this  Act,  the  National  Bank 

may— 

(a) create one or more trusts and transfer loans and advances granted by it, with or without the 

securities, to such trusts, for consideration; 

 (b) set aside loans or advances held by the National Bank and issue and sell securities based upon 
such  loans  or  advances  so  set  aside  in  the  form  of  debt  obligations,  trust  certificates  of  beneficial 
interest  or  other instruments,  by  whatever  name  called,  and  act  as  a trustee  for the  holders  of such 
securities. 

38C.Exemption 

from  compulsory  registration.—Notwithstanding  anything  contained 

in                

sub-section (1) of section 17 of the Registration Act, 1908 (16 of 1908)— 

(a) any instrument in the form of debt obligations or trust certificate of beneficial interest or any 
other instrument, by whatsoever name called, issued by the National Bank or the trust created by it to 
securitise the loans granted by it and not creating, declaring, assigning, limiting or extinguishing any 
right, title or interest to or in immovable property; or 

(b)  any  transfer  of  such  instruments  referred  to  in  clause  (a),  shall  not  require  compulsory 

registration.] 

39.  Incidental  powers.—The  National  Bank  may  also  do  all  such  things  as  may  be  necessary  or 
incidental  to  or  consequential  upon  the  exercise  of  its  powers,  discharge  of  its  functions  and  the 
performance of its duties, under this Act, or under any other law for the time being in force. 

3[40. Deposits and investments.—(1) The National Bank may invest its funds in promissory notes, 
stocks or securities of the Central Government or keep the moneys deposited with the Reserve Bank or 
with any agency of the Reserve Bank or with a State co-operative bank or a scheduled bank. 

(2) Notwithstanding anything contained in sub-section (1) or section 30A, the National Bank may, for 
beneficial investment of its surplus funds, rediscount bills of exchange or promissory notes arising out of 
bona fide trade and commercial transactions and also lend repayable at call or short notice to a scheduled 
bank  or  any  financial  institution  approved  by  the  Reserve  Bank,  or  invest  in  certificates  of  deposit  and 
other instruments or schemes as may be approved by the Board.] 

41. Credit information.—The National Bank may, for the  purpose of the efficient discharge of its 
functions  under  this  Act,  collect  from  or  furnish  to  the  Central  Government,  the  Reserve  Bank  or  any 
banking company or such other financial institution as may be notified by the Central Government in this 
behalf, credit information or other information. 

1. Ins. by Act 55 of 2000, s. 23 (w.e.f. 1-2-2001). 
2. Ins. by s. 24, ibid. (w.e.f. 1-2-2001). 
3. Subs. by s. 25, ibid., for section 40 (w.e.f. 1-2-2001). 

20 

Explanation.—For  the  purposes  of  this  section,  the  expressions  “banking  company”  and  “credit 
information”  shall  have  the  same  meanings  as  in  section  45A  of  the  Reserve  Bank  of  India  Act,  1934  
(2 of 1934). 

CHAPTER VIII  
FUNDS, ACCOUNTS AND AUDIT

42. National Rural Credit (Long Term Operations) Fund.—(1) The National Bank shall establish 

and maintain a Fund to be known as the National Rural Credit (Long Term Operations) Fund. 

(2) The Fund shall (in addition to assets and liabilities transferred under section 18) include,— 

(a) such sums of money as the Central Government and the State Governments may contribute 

from time to time; 

(b) such sums of money as the Reserve Bank may contribute every year; and 

(c) such further sums of money as the Board may contribute every year. 

(3)  The  amount  in  the  said  Fund  shall  be  applied  by  the  National  Bank  only  to  provide  financial 
assistance  by  way  of  loans  and  advances  under  section  23,  section  24,  sub-section  (1)  of  section  25  or 
section 27 or for the purposes of section 26. 

43.  National  Rural  Credit  (Stabilisation)  Fund.—(1)  The  National  Bank  shall  establish  and 

maintain a Fund to be known as the National Rural Credit (Stabilisation) Fund. 

(2) The Fund shall (in addition to assets and liabilities transferred under section 18) include,— 

(a) such sums of money as the Central Government and the State Governments may contribute 

from time to time; 

(b) such sums of money as the Reserve Bank may contribute every year; and 

(c) such further sums of money as the Board may contribute every year. 

(3) The amounts  in  the said  Fund shall be applied  by  the  National  Bank  only  to  provide  loans and 

advances under section 22. 

44. Research and Development Fund.—(1) The National Bank shall establish and maintain a Fund 

to be known as the Research and Development Fund, to which shall be credited— 

(a) such sums of money as are transferable to this Fund in accordance with section 47; 

(b)  such  sums  of  money  as  the  Board  may  contribute  every  year  to  this  Fund  from  out  of  its 

annual profits; and 

(c) such gifts, grants, donations or benefactions which the National Bank may receive and which 

the Board may earmark for this purpose. 

(2) The Research and Development Fund shall be expended on matters of importance to agriculture, 
agricultural operations and rural development, including the provision of training and research facilities 
and the 1[making of loans or advances or grants] under clause (iii) of section 38. 

45. Reserve Fund and other Funds.—The National Bank shall establish a Reserve Fund 2[and other 
Funds]  as  the  Board  may  consider  necessary  by  transferring  such  sums  as  it  may  deem  fit,  out  of  its 
annual profits and out of receipts from gifts, grants, donations or benefactions, which it may receive. 

46. Preparation of balance-sheet, etc., of National Bank.—(1) The balance-sheet and accounts of 

the National Bank shall be prepared and maintained in such form and manner as may be prescribed. 

1. Subs. by Act 55 of 2000, s. 26, for “making of grants” (w.e.f. 1-2-2001). 
2. Subs. by s. 27, ibid., for “and such other Funds” (w.e.f. 1-2-2001). 

21 

(2) The Board shall cause the books and accounts of the National Bank to be balanced and closed as 
on  the  thirtieth  day  of  June  1[or  such  other  date  in  each  year  as  the  Central  Government  may,  by  
notification in the Official Gazette, specify]. 

2[Provided  that  with  a  view  to  facilitating  the  transition  from  one  period  of  accounting  to  another 
period  of  accounting  under  this  sub-section,  the  Central  Government  may,  by  order  published  in  the 
Official  Gazette,  make  such  provisions  as  it  considers  necessary  or  expedient  for  the  balancing  and 
closing of, or for other matters relating to, the books or accounts in respect of the concerned years.] 

47. Disposal of surplus.—After making provision for bad and doubtful debts, depreciation of assets 
and all other matters for which provision is necessary or expedient or which is usually provided for by 
bankers, and for the Funds referred to in sections 42, 43 and 45, the National Bank shall transfer— 

(i) for a period of fifteen years, following the accounting year during which the National Bank is 
established, the amount remaining (hereafter in this section referred to as surplus) to the Research and 
Development Fund under section 44; and 

3[(ii) after the expiry of the said period of fifteen years, the Board shall, after making provision 
for the Fund referred to in clause (i), disburse or spend the balance of the surplus in such manner as 
may be approved by the Board.]

48. Audit.—(1) The accounts of the National Bank shall be audited by auditors duly qualified to act 
as auditors under sub-section (1) of 4[section 141 of the Companies Act, 2013 (18 of 2013)] who shall be 
appointed by the Central Government in consultation with the Reserve Bank, for such term and on such 
remuneration as the Central Government may fix. 

(2) The auditors shall be supplied with a copy of the annual balance-sheet of the National Bank and it 
shall be their duty to examine it together with the accounts and vouchers relating thereto and they shall 
have a list delivered to them of all books kept by the National Bank and shall at all reasonable times have 
access to the books, accounts, vouchers and other documents of the National Bank. 

(3) The auditors may, in relation to the accounts of the National Bank, examine any director of the 
Board  or  any  officer  or  other  employee  of  the  National  Bank  and  shall  be  entitled  to  require  from  the 
Board or officers or employees of the National Bank such information and explanation as they may think 
necessary for the performance of their duties. 

(4) The auditors shall make a report to the National Bank upon the annual balance-sheet and accounts 
examined by them and in every such report, they shall state whether in their opinion the balance-sheet is a 
full and fair balance-sheet containing all necessary particulars and properly drawn up so as to exhibit a 
true  and  fair  view  of  the  state  of  affairs  of  the  National  Bank  and  in  case  they  had  called  for  any 
explanation  or  information  from  the  Board  or  any  officer  or  other  employee  of  the  National  Bank, 
whether it has been given and whether it is satisfactory. 

(5)  The  National  Bank  shall  furnish  to  the  Central  Government  and  the  Reserve  Bank  within  four 
months from the date on which the annual accounts of the National Bank are closed and balanced, a copy 
of its balance-sheet as on the close of that year together with a copy of the profit and loss account for the 
year  and  a  copy  of  the  auditors’  report  and  a  report  of  the  working  of  the  National  Bank  during  the 
relevant year, and the Central Government shall, as soon as may be after they are received by it, cause the 
same to be laid before each House of Parliament and cause the copies of the said balance-sheet, profit and 
loss account and auditors' report to be published in the Official Gazette. 

(6) Without  prejudice to anything  contained in the preceding  sub-sections,  the Central  Government 
may, at any time, appoint the Comptroller and Auditor General of India to examine and report upon the 
accounts of the National Bank and any expenditure incurred by him in connection with such examination 
and report shall be payable by the National Bank to the Comptroller and Auditor General of India. 

1. Subs. by Act 66 of 1988, s. 46, for “, each year” (w.e.f. 30-12-1988). 
2. The proviso inserted by s. 46, ibid. (w.e.f. 30-12-1988).
3. Subs. by Act 55 of 2000, s. 28, for clause (ii) (w.e.f. 1-2-2001). 
4. Subs. by Act 7 of 2018, s. 12, for “section 226 of the Companies Act, 1956 (1 of 1956)”(w.e.f. 15-3-2018). 

22 

49. Returns.—The National Bank shall furnish, from time to time, to the Central Government and to 

the Reserve Bank, such returns as the Central Government or the Reserve Bank may require. 

CHAPTER IX  
STAFF

50. Staff of National Bank.—(1) The National Bank may appoint such number of officers and other 
employees  as  it  considers  necessary  or  desirable  for  the  efficient  performance  of  its  functions  and 
determine the terms and conditions of their appointment and service. 

(2) Without prejudice to the provisions of sub-section (1), it shall be lawful for the National Bank to 
utilise, and for the Reserve Bank to make available, the services of such staff of the Reserve Bank on such 
terms and conditions as may be agreed upon between the National Bank and the Reserve Bank. 

(3) Subject to the provisions of sub-section (6), at any time before the expiry of six months from the 
appointed day, the Reserve Bank may, in public interest, transfer to the National Bank, such members of 
the staff of Reserve Bank whom the Reserve Bank considers as engaged, or as suitable to be engaged, in 
attending to the work of a nature which is same or similar to that which the National Bank may require for 
its  efficient  functioning,  and  upon  such  transfer  they  shall  be  deemed  to  be  appointed  by  the  National 
Bank under sub-section (1) with effect from the date of such transfer: 

Provided that every person so transferred may, before the expiry of a period of six months from the 
appointed day, or before the expiry of a period of thirty days from such transfer, whichever period expires 
later,  elect  to  go  back  to  the  Reserve  Bank  by  exercising  an  option in  writing  to  that effect, the option 
once  exercised  being  final,  and  on  the  exercise  of  such  option,  the  Reserve  Bank  shall,  before  the 
expiration of a period of eighteen months from the appointed day, take back such member of the staff and 
he shall be deemed to have been on deputation to the National Bank during the period he was a member 
of the staff of the National Bank. 

(4) (a) Any member of the staff of the Reserve Bank who is not appointed under sub-section (3), may, 
if he so desires, make an application to the Reserve Bank within six months from the appointed day, to be 
considered for appointment as a member of the staff of the National Bank. 

(b) The Reserve Bank may, in consultation with the National Bank, consider such application having 
regard to the suitability of the person so applying, the availability of vacancies in the National Bank, the 
exigencies  of  service  in  the  Reserve  Bank  and  the  National  Bank  and  such  other  factors  as  may  be 
considered relevant in this regard, and, if the Reserve Bank is satisfied having regard to these factors, that 
such applicant is suitable for being so appointed recommend his appointment to the National Bank. 

(c) The National Bank may thereupon, within eighteen months from the appointed day, appoint such a 
person  applying  under  this  sub-section,  as  a  member  of  the  staff  of  the  National  Bank,  and  on  such 
appointment,  such  a  person  shall  be  deemed  to  have  been  appointed  in  the  National  Bank  under  
sub-section (3): 

Provided  that  the  proviso  to  sub-section  (3)  and  the  proviso  to  sub-section  (5)  shall  not  apply  in 

respect of such a person. 

(5) Notwithstanding anything contained elsewhere in this Act or in any other law or in any contract, 
for  the  time  being  in  force,  at  any  time  before  the  expiry  of  six  months  from  the  appointed  day,  the 
Reserve  Bank  may,  if  it  considers  it  necessary  in  consultation  with  the  National  Bank  so  to  do  in  the 
interest of the National Bank, transfer on promotion any member of the staff of the National Bank to the 
Reserve Bank, and on such transfer to the Reserve Bank, each such member of the staff shall be deemed 
to be a member of the staff of the Reserve Bank and shall be entitled to the same salary, emoluments and 
other  conditions  of  service  to  which  he  was  entitled  immediately  before  the  date  of  such  transfer, 
including benefits, if any, arising directly out of such promotion: 

Provided that every member of the staff who is transferred as aforesaid may, before the expiry of a 
period of six months from the appointed day or within thirty days from such transfer, whichever period 
expires later, elect to go back to the National Bank by exercising an option in writing to that effect, the 
option once exercised being final, and on the exercise of such option, the National Bank shall, before the 

23 

expiration of a period of eighteen months from the appointed day, take back such member of the staff and 
he shall be deemed to have been on deputation to the Reserve Bank during the period he was a member of 
the staff of the Reserve Bank. 

(6) Every person,— 

(a) who, immediately before the date appointed under sub-section (1) of section 16, is a member 

of the staff of the Agricultural Refinance and Development Corporation; or 

(b)  who  is  a  member  of  the  staff  of  the  Reserve  Bank  but  whose  services  are  being  utilised 

immediately before that date by the said Corporation, 

shall be deemed to be appointed by the National Bank under sub-section (1) on the said date: 

Provided that every member of the staff of the Reserve Bank, who is so deemed to be appointed, and 
who  was  not  recruited  specifically  for  utilisation  in  the  Agricultural  Refinance  and  Development 
Corporation, may, before the expiry of a period of six months from the appointed day or within a period 
of thirty days from the date appointed under sub-section (1) of section 16, whichever period expires later, 
elect  to  go  back  to  the  Reserve  Bank  by  exercising  an  option  in  writing  to  that  effect,  the  option  once 
exercised being final, and on the exercise of such option, the Reserve Bank shall, before the expiration of 
a period of eighteen months from the appointed day, take back such member of the staff and he shall be 
deemed to have been on deputation to the National Bank during the period he was a member of the staff 
of the National Bank. 

(7) Notwithstanding anything contained in any other law or in any agreement, for the time being in 
force, no member of the staff shall be entitled to claim any compensation for, or in relation to any matter 
concerning, his transfer, appointment or as the case may be, return, under sub-sections (3) to (6) and no 
claim in respect thereof shall be entertained by any court, tribunal or other authority. 

(8) Subject to the provisions of sub-section (10) and sub-section (11), every member of the staff of 
the Agricultural Refinance and Development Corporation or of the Reserve Bank who is deemed to be 
appointed as a member of the staff of the National Bank under this section, shall be deemed to have been 
appointed by the National Bank on the same salary, emoluments and other terms and conditions of service 
to which he was entitled immediately before his appointment in the National Bank. 

(9) The provisions relating to superannuation benefits, namely,  the regulations relating to provident 
fund  and  the  rules  relating  to  payment  of  gratuity  and  compassionate  gratuity  and  any  other  provision 
relating to superannuation as are applicable to the staff of the Reserve Bank on the appointed day shall, so 
far as may be, apply to the staff of the National Bank, unless and until the National Bank alters or amends 
the same: 

Provided  that  after  the  appointed  day,  any  such  alteration  or  amendment  may  be  effected  by  the 
National  Bank  as  regards  provident  fund  regulations  in  accordance  with  section  60,  and  as  regards  the 
other rules in the manner they would have been altered or amended but for this sub-section: 

Provided further that after the expiry of six months from the appointed day, the balances held in the 
Reserve Bank of India Employees’ Provident Fund to the credit of any member of the staff of the Reserve 
Bank whose services are transferred under this section to the National Bank and who does not opt to go 
back to the Reserve Bank, shall be transferred to, and held in, the Provident Fund of the National Bank on 
same  or  similar  terms  subject  to  which  those  balances  were  held  earlier  in  the  Reserve  Bank  of  India 
Employees’ Provident Fund. 

(10)  Notwithstanding  anything  contained  in  any  other  law,  settlement,  or  agreement,  every  person 
employed by the National Bank or whose services have been transferred to the National Bank under this 
Act, shall be liable to serve anywhere in India. 

(11)  Notwithstanding  anything  contained  in  the  Industrial  Disputes  Act,  1947  (14  of  1947),  or  any 
other  law  for  the  time  being  in  force,  or  in  any  award,  judgment,  decree,  decision  or  order  of  any 
Industrial Tribunal, Court or other authority, or any settlement or agreement, made or entered into before 
the  date  of transfer  to  the National  Bank  of  the  services  of  any  person  under  this  section,  the  National 
Bank shall be free to alter, amend or repeal in such manner and to such extent it may consider necessary, 

24 

any of the terms and conditions of service applicable to such persons whose services are so transferred to 
the National Bank and who are appointed in the National Bank under this section except that the National 
Bank  shall  not  alter  to  their  prejudice  the  terms  relating  to  payment  of  salary  and  other  emoluments, 
retirement benefits and eligibility for leave. 

Explanation.—For the purposes of this section, “appointed day” means the date of establishment of 

the National Bank under section 3. 

CHAPTER X 
MISCELLANEOUS

51.  Obligation  as  to  fidelity  and  secrecy.—(1)  The  National  Bank  shall  not,  except  as  otherwise 
required  by  this  Act  or  any  other  law,  divulge  any  information  relating  to,  or  to  the  affairs  of,  its 
constituents  except  in  circumstances  in  which  it  is,  in  accordance  with  the  law  or  practice  and  usage 
customary among bankers, necessary or appropriate for the National Bank to divulge such information. 

(2) Every director, member of a committee, auditor, officer or other employee of the National Bank or 
of the Reserve Bank, whose services are utilised by the National Bank under the provisions of this Act, 
shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the 
First Schedule to this Act. 

1[(3) Nothing contained in this section shall apply to the credit information disclosed under the Credit 

Information Companies (Regulation) Act, 2005 (30 of 2005).]

52. Defects in appointment not to invalidate acts, etc.—(1) No act or proceeding of the Board or of 
any  committee  of  the  National  Bank  shall  be  questioned  on  the  ground  merely  of  the  existence  of  any 
vacancy in, or defect in the constitution of, the Board or the committee, as the case may be. 

(2) No act done by any person acting in good faith as a director of the Board or as a member of a 
committee of the National Bank shall become invalid merely on the ground that he was disqualified to be 
a director or that there was any other defect in his appointment. 

2[52A. Agreement with National Bank on appointment of directors to prevail.—(1) Where any 
agreement entered into by the National Bank with a company or a body corporate while  granting loans 
and  advances,  provides  for  the  appointment  by  the  National  Bank  of  one  or  more  directors  of  such 
company or body corporate, such provisions and any appointment of directors made in pursuance thereof 
shall be valid and effective, notwithstanding anything to the contrary contained in  3[the Companies Act, 
2013  (18  of  2013)] or  in  any  other  law  for  the  time  being  in  force,  or  in  the  memorandum,  articles  of 
association  or  any  other  instrument  relating  to  the  company  or  body  corporate,  and  any  provision 
regarding  share  qualification,  age-limit,  number  of  directorships,  removal  from  office  of  directors  and 
such  like  conditions  contained  in  any  such  law  or  instrument  aforesaid,  shall  not  apply  to  any  director 
appointed by the National Bank in pursuance of the agreement as aforesaid. 

(2) Any director appointed as aforesaid shall— 

(a) hold office during the pleasure of the National Bank and may be removed or substituted by 

any person by order in writing of the National Bank; 

(b) not incur any obligation or liability by reason only of his being a director or for anything done 
or omitted to be done in good faith in the discharge of his duties as a director or anything in relation 
thereto; 

(c) not be liable to retirement by rotation and shall not be taken into account for computing the 

number of directors liable to such retirement.]

53. Protection of action taken under the Act.—No suit or other legal proceeding shall lie against 
the  National  Bank  or  any  director  or  any  officer  or  other  employee  of  the  National  Bank  or  any  other 
person authorised by the National Bank to discharge any functions under this Act for any loss or damage 

1. Ins. by Act 30 of 2005, s. 34 and the Schedule (w.e.f. 14-12-2006).
2. Ins. by Act 55 of 2000, s. 29 (w.e.f. 1-2-2001). 
3. Subs. by Act 7 of 2018, s. 13, for “the Companies Act, 1956 (1 of 1956)” (w.e.f. 15-3-2018). 

25 

caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance 
of this Act or of any other law or provision having the force of law. 

54. Indemnity of directors.—(1) Every director shall be indemnified by the National Bank against 
all losses and expenses incurred by him in, or in relation to, the discharge of his duties, except such as are 
caused by his own wilful act or default. 

(2) A director shall not be responsible for any other director or for any officer or other employee of 
the  National  Bank  or  for any  loss or expenses  resulting  to  the  National  Bank  from  the  insufficiency  or 
deficiency of the value of, or title to, any property or security acquired or taken on behalf of the National 
Bank or the insolvency or wrongful act of any debtor or any person under obligation to the National Bank 
or anything done in good faith in the execution of the duties of his office in relation thereto. 

55. [Exemption from income-tax, etc.]—Omitted by the Finance Act, 2001 (14 of 2001), s. 140 (w.e.f. 

1-4-2002). 

56. Penalties.—(1) Whoever in any return, balance-sheet, or other document or in any information 
required  or  furnished  by  or  under  or  for  the  purposes  of  any  provision  of  this  Act,  wilfully  makes  a 
statement  which  is  false  in  any  material  particular,  knowing  it  to  be  false,  or  wilfully  omits  to  make  a 
material statement, shall be punishable with imprisonment for a term which may extend to three years and 
shall also be liable to fine. 

(2) If any person fails to produce any book, account or other document, or to furnish any statement or 
information  which,  under  the  provisions  of  this  Act,  it  is  his  duty  to  produce  or  furnish,  he  shall  be 
punishable  with  a fine  which  may  extend  to  two  thousand rupees  in  respect  of  each  offence  and  in the 
case of a continuing failure, with an additional fine which may extend to one hundred rupees for every 
day during which the failure continues after conviction for the first such failure. 

57. Offences by companies.—(1) Where an offence has been committed by a company, every person 
who, at the time the offence was committed, was in charge of, and was responsible to the company for the 
conduct  of  the  business  of  the  company,  as  well  as  the  company,  shall  be  deemed  to  be  guilty  of  the 
offence and shall be liable to be proceeded against and punished accordingly: 

Provided  that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment provided in this Act, if he proves that the offence was committed without his knowledge or 
that he exercised all due diligence to prevent the commission of such offence. 

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been 
committed  by  a  company  and  it  is  proved  that  the  offence  has  been  committed  with  the  consent  or 
connivance  of,  or  is attributable  to  any  neglect  on the  part  of  any  director,  manager,  secretary  or  other 
officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty 
of that offence and shall be liable to be proceeded against and punished accordingly. 

Explanation.—For the purpose of this section— 

(a) “company” means any body corporate and includes a firm or other association of individuals; 

and 

(b) “director”, in relation to a firm, means a partner in the firm.  

58.  Bankers’ Books  Evidence  Act,  1891, to  apply in  relation  to  National Bank.—The  Bankers’ 
Books Evidence Act, 1891 (18 of 1891), shall apply in relation to the National Bank as if it were a bank 
as defined in section 2 of that Act. 

59. Liquidation of National Bank.—No provision of law relating to the winding up of companies 
shall apply to the National Bank and the National Bank shall not be placed in liquidation save by order of 
the Central Government and in such manner as it may direct. 

60. Power of Board to make regulations.—(1) The Board may, with the previous approval of the 
Central  Government  and  in  consultation  with  the  Reserve  Bank,  by  notification,  make  regulations  not 
inconsistent with this Act to provide for all matters for which provision is necessary or expedient for the 
purpose of giving effect to the provisions of this Act. 

26 

(2) In particular and without prejudice to the generality of the foregoing power, such regulations may 

provide for all or any of the following matters, namely:— 

(a) the fees or allowances that may be paid to the directors or members of the Advisory Council; 

(b) the times and places of the meetings of the Board or the Executive Committee or the Advisory 
Council and the procedure to be followed at such meetings including the quorum necessary for the 
transaction of business; 

(c)  the  number  of  directors  constituting  the  Executive  Committee  and  the  functions  that  such 

Committee shall discharge; 

(d) the manner and terms of issue and redemption of bonds and debentures by the National Bank; 
1[(e) the manner of election of directors under clause (f) of sub-section (1) of section 6;] 
2* 

* 

* 

* 

* 

(g) The form and manner in which the balance-sheets and the accounts of the National Bank shall 

be prepared or maintained; 

2* 

* 

* 

* 

* 

(i)  the  duties  and  conduct,  salaries,  allowances  and  conditions  of  service  of  officers  and  other 

employees; 

(j) the  establishment  and  maintenance  of  provident or  other  benefit funds  for  employees  of  the 

National Bank; and 

(k) such other matters for which the Board may consider it expedient or necessary to provide for 

by way of regulations. 

(3)  Any  regulation  which  may  be  made  by  the  Board  under  this  Act  may  be  made  by  the  Reserve 
Bank, in consultation with the Central Government, before the expiry of three months from the date  of 
establishment  of  the  National  Bank,  and  any  regulation  so  made  may  be  altered  and  rescinded  by  the 
Board in the exercise of its powers under this Act. 

(4)  The  power  to  make  regulations  conferred  by  this  section  shall  include  the  power  to  give 
retrospective  effect  to  the  regulations  or  any  of  them  from  a  date  not  earlier  than  the  date  of 
commencement  of  this  Act,  but  no  retrospective  effect  shall  be  given  to  any  regulation  so  as  to 
prejudicially affect the interest of any person to whom such regulation may be applicable. 

(5) The Central Government shall cause every regulation made under this Act to be laid, as soon as 
may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty 
days  which  may  be  comprised in  one session or  in  two  or  more  successive  sessions,  and if,  before  the 
expiry of the session immediately following the session or the successive sessions aforesaid, both Houses 
agree in making any modification in the regulation or both Houses agree that the regulation should not be 
made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case 
may be; so, however, that any such modification or annulment shall be without prejudice to the validity of 
anything previously done under that regulation. 

[61.  Amendment  of  certain  enactments].—Rep.  by  the  Repealing  and  Amending  Act,  1988

(19 of 1988), s. 2 and the First Schedule (w.e.f. 31-3-1988).

62.  Power  to  remove  difficulty.—If  any  difficulty  arises  in  giving  effect  to  the  provisions  of  this 
Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the 
difficulty: 

Provided  that  no  such  order  shall  be  made  after  the  expiry  of  a  period  of  three  years  from  the 

commencement of this Act. 

1. Subs. by Act 55 of 2000, s. 30, for clause (e) (w.e.f. 1-2-2001). 
2. Clauses (f) and (h) omitted by s. 30, ibid. (w.e.f. 1-2-2001).

27 

THE FIRST SCHEDULE 

[See section 51(2)] 

DECLARATION OF FIDELITY AND SECRECY

I  do  hereby  declare  that  I  will  faithfully,  truly  and  to  the  best  of  my  skill  and  ability  execute  and 
perform the duties required of me as director, auditor officer or other employee (as the case may be) of 
the  National  Bank  for  Agriculture  and  Rural  Development  and  which  properly  relate  to  the  office  or 
position held by me in the said National Bank. 

I further declare that I will not communicate or allow to be communicated to any person not legally 
entitled  thereto  any  information  relating  to  the  affairs  of  the  National  Bank  for  Agriculture  and  Rural 
Development or to the affairs of any person having any dealing with the said National Bank nor will I 
allow  any  such  person  to  inspect  or  have  access  to  any  books  or  documents  belonging  to  or  in  the 
possession of the National Bank for Agriculture and Rural Development and relating to the business of 
the said National Bank or the business of any persons having any dealing with the said National Bank. 

Signed before me 

(Signature) 

[THE SECOND SCHEDULE].—Rep. by the Repealing and Amending Act, 1988 (19 of 1988), s. 2 and the 
First Schedule (w.e.f. 31-3-1988).

28 

